Mortgages are often the largest loans most people will ever take out, and getting one doesn’t have to be a daunting process with proper planning and knowledge.
No matter if you’re a first-time buyer or an existing homeowner looking to upgrade, knowing the basics of getting a mortgage can make your experience simpler and less stressful. From understanding what lenders require to understanding the steps involved in getting approved, this guide will take you through each step of the process.
Before You Purchase A House
Once you’ve identified the ideal property, it’s time to search for a lender. A lender can assess your financial needs and suggest which home loan type best fits within budget. They also provide valuable insights into finding the most competitive mortgage rate as well as provide other useful info regarding the homebuying process.
Before You Apply For a Mortgage
Once your application is accepted, the next step in the process is called underwriting. During underwriting, the lender reviews your employment and credit history, property appraisal and other factors to confirm you qualify for the loan.
When selecting a lender for the duration of your mortgage, it’s essential that you select one whom you can trust and work well with. Furthermore, ensure all paperwork is in order so the process moves along quickly from application to closing.
How to Acquire a Mortgage
Lenders will evaluate several factors when you apply for a mortgage, such as your income and employment history, debt-to-income ratio and credit report. They’ll also look at any assets such as stocks or savings accounts you own.
It is essential to have a good credit score and enough down payment saved for the home you plan to buy. These can make all the difference in getting approved for a mortgage or being turned down.
A down payment is cash that you pay to a lender as part of the initial loan repayment, helping to avoid private mortgage insurance and saving you money in the long run by decreasing your monthly payments.
Maintain Your Credit Rating
In order to qualify for a mortgage and the interest rate that comes with it, your credit score must be in the 700s or higher. This demonstrates to lenders you can manage your debt responsibly and get you an advantageous rate on a loan.
If you’re uncertain of your credit, request free reports from each major reporting agency — Equifax, Experian and TransUnion. Be sure to read these reports carefully and monitor your scores promptly so they remain as accurate as possible.
When applying for a mortgage, it’s wise to keep copies of your paystubs, tax returns and W-2 in your wallet. Documenting any extenuating circumstances that have affected your credit history – such as job loss or medical emergency – may help expedite the process.